By Andrew Kennedy, AVP – Funeral Home & Cemetery Lending at Live Oak Bank
In our recent Voice of the Customer Survey, powered by Barlow Research, 28% of Live Oak customers cited cash flow management as a primary concern.
Effectively managing cash flow is paramount to the sustainability of any business, especially in the sensitive and often unpredictable funeral home and cemetery industry. Cash flow is the inflow and outflow of your funeral home or cemetery’s funds, as detailed in a cash flow statement. Without a steady revenue stream, even successful funeral homes and cemeteries can face financial challenges. This article highlights common cash flow pitfalls and provides actionable advice to bolster your financial stability.
Poor Budgeting and Forecasting
Accurate budgeting is crucial for funeral homes and cemeteries. Failing to anticipate expenses like property maintenance, equipment upkeep, or fluctuating material costs can lead to financial strain. By carefully estimating income from services, merchandise and preneed arrangements and balancing it against operational expenses, you can prevent overspending and ensure a steady cash flow.
Live Oak Tip: Separating personal and business finances is essential for effective budgeting.
Overspending and Cash Reserves
The funeral and cemetery industry involves significant investments in facilities, equipment and inventory. Overspending on nonessential items can deplete your cash reserves, leaving you vulnerable to unexpected expenses. Maintaining a cash reserve for emergencies such as economic downturns, natural disasters or unforeseen operational challenges is crucial. By securing better deals from suppliers and finding ways to reduce costs, you can protect your cash flow.
Limited Access to Credit
A line of credit can be a lifeline during unexpected financial setbacks. However, relying heavily on credit can lead to a cycle of debt if not managed responsibly. Building and maintaining strong business credit is essential for securing financing when needed. A strong credit history can provide access to loans for expansion, equipment upgrades, or to bridge cash flow gaps.
Pricing Strategies
Setting appropriate pricing for services and merchandise is vital for cash flow. Underpricing can lead to lost revenue while overpricing may deter potential clients. Study your competitors’ pricing and determine the unique value your services offer. Consider tiered pricing options or package deals to cater to different customers’ needs and budgets.
Delayed Payments
Uncollected or delayed payments can significantly impact cash flow. Implementing clear payment terms, sending timely invoices, and following up promptly on overdue accounts is crucial. Offering convenient payment options like credit cards or online payment portals can expedite the collection process. Building strong relationships with clients can also encourage timely payments.
By proactively addressing these cash flow challenges, funeral homes and cemeteries can enhance their financial resilience and ensure long-term sustainability. Live Oak Bank is dedicated to supporting the needs of the death-care profession. To learn more or to contact a member of our team, visit liveoakbank.com/funeral.
Andrew Kennedy began his career at Live Oak Bank as a business analyst servicing Funeral Home customers on the West Coast and fitness customers all across the country. He now serves as a loan officer specializing in funeral home and cemetery and property management financing. He graduated from Wake Forest University where he majored in communication and minored in entrepreneurship and social enterprise. In his free time, he enjoys playing golf and traveling.
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